FTX Aims to Retrieve $700 Million from Associates and Related Investment Funds Linked to Bankman-Fried

FTX Launches Legal Battle Seeking $700 Million from Bankman-Fried’s Associates and Connected Investment Funds

FTX, the cryptocurrency exchange, has taken legal action in the US Bankruptcy Court for the District of Delaware against several investment firms that were previously associated with the company before its downfall. The lawsuit, filed on June 22, includes 16 separate charges and aims to reclaim more than $700 million from the defendants.

The lawsuit specifically targets incubator and investment company K5 Global, along with Mount Olympus Capital and SGN Albany Capital, in addition to affiliated entities and the co-owners of K5 Global, Michael Kives and Bryan Baum. Kives, a former agent at the CAA talent agency and ex-aide to Hilary Clinton, hosted a high-profile dinner party in 2022 that was attended by FTX’s then-CEO, Sam Bankman-Fried:

“Known for his extensive networking connections, Kives invited notable figures to the dinner party, including a former presidential candidate, prominent actors, musicians, reality TV stars, and multiple billionaires.”

According to the lawsuit, FTX-affiliated crypto trading firm Alameda Research subsequently transferred $700 million to Kives, Baum, and K5 Global. However, the transfers were deliberately obscured by presenting them as originating from shell companies SGN Albany and Mount Olympus Capital.

The lawsuit seeks the return of funds that were transferred from Alameda Research to SGN Albany Capital, as well as funds transferred from Kives, Baum, and SGN Albany Capital to Mount Olympus Capital.

The transfers are alleged to have occurred “without fair compensation” and were deemed “avoidable.” In the context of US bankruptcy law, an avoidable transaction refers to a transfer that can be reversed under the Bankruptcy Code or other relevant laws.

The lawsuit also reveals close personal ties between Kives, Baum, and Bankman-Fried, with Baum even having his own bedroom in the FTX executives’ residence in the Bahamas. Following FTX’s collapse, “Kives and Baum worked behind the scenes with Bankman-Fried on a strategy to find a savior for the FTX Group (and safeguard their own interests).”

Responding to the lawsuit, a spokesperson for K5 Global dismissed the claims, stating that the legal action is “baseless.”

“K5 Global is a venture capital firm managing over $1 billion in assets, separate from any funds related to Bankman-Fried and his affiliates. In mid-2022, an affiliate of Sam Bankman-Fried and Alameda acquired a third of K5’s general partnership through cash and stock, and eventually made a $400 million investment in certain funds managed by K5,” the spokesperson explained.

“K5, like many others, believed that Bankman-Fried was entirely legitimate and entered into a fair, long-term, mutually beneficial business relationship. We firmly believe that this lawsuit holds no merit.”

Out of the 16 counts in the lawsuit, nine pertain to fund transfers. Personal charges of aiding and abetting breach of fiduciary duty and dishonest assistance were filed against Kives and Baum, while SGN Albany Capital faces allegations of unjust enrichment.